Building brands in a changing society

The ROI of social responsibility

A quick scan of websites shows the extent to which corporate responsibility is now a cost of doing business: GE employees volunteered 20,000 hours to paint and clean public schools in Wisconsin; ExxonMobil donated $1.1 million to anti-malaria programs in Africa through a partnership with American Idol; CIBC sponsors Run for the Cure, Canada’s largest event in support of breast cancer.

Certainly the public expects corporations to shoulder broad social and environmental responsibilities, whether around the world or in the local community. The 2010 Cause Evolution Study released by Cone, a communications agency focused on cause branding, found that the majority of Americans think corporations should be tackling serious issues like education, hunger, disaster relief and the environment through their business practices or philanthropy.

Companies have responded with a raft of employee engagement programs, donations, sponsorships and partnerships intended to satisfy the demand for good corporate citizenship. In fact, with so many companies making large investments in corporate responsibility initiatives, it’s easy to conclude that the value of social and environmental programs is well understood and accounted for in annual reports.

However, as found by the 2009 McKinsey Global Survey, while most executives believe that social responsibility programs are useful for risk mitigation or corporate reputation, there is no consensus on how to measure the value to shareholders.

Even corporate social responsibility professionals, the strongest advocates of such programs, have difficulty identifying the value they offer; over half say they don’t know the effect of environmental, social and/or governance initiatives on shareholder value.

Saul said that the majority of corporate responsibility programs were originally intended to reduce a company’s risk and satisfy the social contract; the notion that such programs might also produce value was an afterthought.

The alternative, Saul argues, is to develop strategies that provide both social and business value: solving social issues while generating a return on investment. Or, more simply, “it’s okay to expect an economic return from doing good.” Saul points to the example of Wal-Mart’s $4 prescription drug program, which provided customers with low-cost access to generic drugs, a boon to the uninsured and Medicare recipients.

Interestingly, the results of the McKinsey Global Survey reinforce that the business opportunity offered by solving social problems is not fully appreciated; 50% of CFOs see corporate responsibility programs as simply an exercise in compliance and transparency while only 10% see such programs as a chance to create new revenue streams.

Every corporation wants to see measurable results from its endeavours. If corporate responsibility initiatives can deliver not just public goodwill but financial value as well, those programs stand a much better chance of being sustainable themselves.